Association health plans (also called AHPs) allow small businesses to band together to buy insurance. As an entrepreneur you already know three things about health insurance: It’s complicated, choosing a plan to purchase is hard, and affordable options aren’t always available. However, a recent change to association health plan regulation has opened up new possibilities.
Here are the five most important things you should know.
1. What are association health plans?
Association health plans (AHPs) are a type of group medical insurance that enables health plan participants from different businesses and industries to band together and access health insurance savings normally restricted to large companies. Under the new regulation, it has become easier for businesses to collaborate on a single health plan.
Small businesses can form an association based on a shared profession or business activity or they can form an association around a shared geographical region such as a metro area, county, or state. With respect to metro areas, an association health plan could offer health insurance to businesses spanning parts of several states (e.g. the New York City Tri-State region that includes portions of New York, New Jersey, and Connecticut).
2. Can self-employed individuals participate in association health plans?
Yes! The new regulation expanded eligible plan participants to include “working owners,” such as sole proprietors, freelancers, and other self-employed individuals. Importantly, a self-employed individual participating in an association health plan is not required to be incorporated. Work can be as informal as providing music lessons or performing handyman labor. However, there are conditions that must be satisfied in order for a self-employed person to join an association health plan.
The health plan must be open to self-employed individuals (this is optional on the part of the health plan and not mandated by the new regulation)
The self-employed individual must meet the membership criteria for the association (e.g. the profession or the region that defines the association’s scope of membership)
The self-employed individual must either make monthly earnings equal to the cost of the plan’s insurance premium or work 20 hours a week/80 hours a month at the business activity that qualifies them for plan participation
As we see in the last point, the new regulation provides a new range of health plan options for the country’s growing gig economy.
3. How do AHPs work?
Association health plan insurance is similar to other forms of medical coverage inasmuch as there is a defined set of benefits, monthly premiums, deductibles, and limits on out-of-pocket costs. However, not all benefit packages offered through an association health plan include the same benefits as plans offered in the individual and small group health insurance market.
Meanwhile, association health plans are still subject to numerous benefit requirements, including pre-existing conditions, maternity benefits, and preventive care, but they are not required to cover all 10 categories of benefits mandated by the Affordable Care Act.
Be sure to protect yourself by carefully evaluating an association health plan’s Summary of Benefits and Coverage as well as the plan’s network of doctors and hospitals prior to any enrollment decision.
4. Will an association health plan save me money?
The point of the new regulation is to reduce health insurance costs by allowing small businesses and self-employed individuals to form “large group” health plans which are typically less expensive than small group plans and individual health insurance.
According to a recent report by research and consulting firm Avalere Health, “AHPs will likely offer lower premiums for many enrollees.” In fact, the report predicts premiums may be between $1,900 to $4,100 lower than the yearly premiums in the small group market and $8,700 to $10,800 lower than the yearly premiums in the individual market by 2022, depending on the benefits that are offered. Some early examples of the new association health plans have offered coverage that is 10 percent to 35 percent less expensive than comparable plans.
5. Are AHPs available in my area?
The new association health plans are just entering the market so it may take a while for one to be available in your region. Implementation of the new regulation began in September 2018, but won’t be fully effective until April of 2019. However, a couple dozen association health plans have already been announced and more continue to form. Reach out to your local Chamber of Commerce to ask if they are aware of any association plans in your area.
A passionate consumer advocate, Kev Coleman is well known for his influential nonpartisan research on the health care market. He is the author of “Association Health Plans & the Future of Health Insurance” and founder of AssociationHealthPlans.com, the most extensive online resource for association health plan information.